Business & Corporate Strategy for Ontario Monuments Builders

See the attachments.

Case

The notes below are from interviews with the Ontario Monuments Builders Association regarding marketing problems in that industry.

Jim Slate, President of Slate Bros., a supplier of monuments and tombstones, was attending a reception at the Annual Meeting of the Ontario Monument Builders Association. Slate Bros. sold tombstones and monuments through selling arrangements with funeral parlors.

During an interview, Slate commented that "It's tough selling premium priced products like ours these days. In the old says, each parlor carried only one brand of monument. People buying monuments were not price-sensitive: rather, they equated the price they'd be willing to pay with their emotional attachment to, and respect for, the deceased. Buyers believed that quality and price went hand-in-hand. The only question was how much they could afford."

Nowadays, it's different. Some people are planning their own funerals and, possibly out of modesty, they are instructing their estates to conserve resources. Some are even doing their own shopping and expect the funeral parlors to carry monuments from more than one supplier. Worse yet, whether the purchase is for themselves or others, the majority of buyers seem to feel that all they need is an 'average sized tombstone' at the lowest price. Size, durability, detail work and other subtle aesthetics like uniformity of color just don't seem to be appreciated" As for the parlors, they really don't understand selling: they're use to be being basic order-takers and don't seem able or willing to get customers to tradeup".

Questions:

a. What sorts of things could Slate do if he wishes to successfully offer a premium priced product? Be certain to comment both on the nature of the product offering and the supporting infrastructure.

b. What sorts of things might Slate consider doing if he discovers that he cannot do the things required to support a premium price and, instead, decides to become a "low cost producer"? Be certain to comment both on the nature of the product offering and the supporting infrastructure.

c. What sorts of things should Slate consider if he wishes to accept current price and cost conditions and instead pursue growth by pursuing increased market share?

d. If Slate considers the profit opportunities in the current tombstone business to be too limited, where would you advise him to search for new market opportunities and what should he consider in evaluating each one.

This topic introduces the distinction between corporate, business and function-based (as in marketing) strategy. As such, it lays a foundation for understanding the components of various "plans". In addition, since managers are expected both to populate those plans (with facts, assumptions and opinions) and to execute those plans it also offers an opportunity to see how the various subject areas inter-relate.

You will see the two key questions that dictate the "typical" profit potential of a business: where and how to compete. You'll also see the three resulting ways in which answers to those questions seek to improve profitability and you'll be exposed to the planning methods/issues that are used to make those decisions.

One of the most significant thing you will see in this session is the relative impact of alternative "profit vehicles" and the tradeoffs required when you focus on one of these vehicles at the expense of others. This will seguay into a discussion of how marketing impacts on each profit vehicle and the assorted challenges presented at different stages of a product's lifetime.

Topic 2: Premium Pricing

Our session on premium price is NOT about how to set a price but rather on how your strategic actions impact on the likelihood a customer is willing to pay a premium to acquire what you have.

This subject matter is among the most important you will cover in all of your MBA because it deals with the essence of business success: how you create value for customers, your organization and shareholders. In this session you'll see how something a simple and seemingly semantic as your "business arena" can shape the destiny - not just the profitability - of your business.

The key phrase will be repeated often: "No one ever paid more for something they could get elsewhere for less". Hence we'll focus on the four alternative levels of differentiation and, in the process, discuss the implications of each for how the business is structured and managed. We'll also show how businesses cycle through the levels of differentiation over the lifetime of their technology.

Topic 3: Low Cost Producer

Anyone can slash costs. The challenge is to reduce and contain those costs WITHOUT destroying quality and your corporate culture in the process. In this ession we look at two general classes of concepts that show how to do this: volume-related and process-related methods.

Our discussion of volume-related methods will focus on scale and scope. THESE ARE MASSIVELY IMPORTANT CONCEPTS since they underly not only the success of giants like WalMart, 3M, Ikea and Microsoft but also because they are the target of much of what is "hot" in management today: from global business to core competence to outsourcing and value-add. Indeed, when these "hot concepts" fail it is almost always due to an attempt to realize economies of scale and scope when the environment made their achievement unlikely.

Our discussion of process-related methods will look at concepts like automation, re-eingineering and new technologies including e-commerce and m-commerce (mobility). It ends with a discussion of market focus as a means of cost reduction and thus lays the foundation for niche-type strategies

This topic concludes with a comparison of the difference between the infrastructure, culture and process required to support a premium price from low-cost producer strategy.

Topic 4: Building Market Share

While there can be no denying the importance of margin issues, volume - and in particular market share - have historically served as THE major targets of many business' strategies. In part this is because of the drive for scale (see Topic 3) and in part it is because it is the ultimate multiplier of margin and a signal of relative strength versus immediate competition.

We'll begin by contrasting the "share game" versus the "price-game" and "cost-game" already covered. Next we'll consider the pursuit of market share in two stages: market selection and market penetration. This is very much akin to our discussion in topic 1 of "Market Attractiveness" and "Competitive Position".

Specifically, we'll review the various methods and approaches used by different firms to select the market segments to pursue. We'll then look at how we determine what needs to be done in order to improve our penetration of the segments chosen.

A key aspect of marketing in general, and of the pursuit of share in particular, is market segmentation. While we will not be going into the mechanics of segmentation (you'll see that in your marketing course), we will discuss the general idea and provide some slides that you can optionally review to get up to speed

Topic 5: Market Size

It is often said you either "grow or die". Indeed, in many firms, top-line growth (ie revenue) is one of the key metrics by which marketing performance is measured. That said, while "grow or die" is true in principle, many firms actually accelerate their demise because they seek to grow in the wrong way!!!

In this session we'll look at the four alternative ways a business can grow their top-line revenues and the requirements for success in each. We'll also outline the three types of growth directions a business (as opposed to a product) can take. We'll also use this session as a means of overall review by looking at the considerations one must take into account in proposing a growth opportunity.

Attachments

Solution Preview

1. It is not easy to sell premium products, especially when people have become price sensitive over years. The customer segment has already tried the premium products and believes that there is no requirement for premium products. Slate needs to redefine the business strategy as the target segment has become unresponsive to the old tactics the company used to sell products to the same customer segment. The strategy which could be used in this situation is differentiation. This strategy involves selecting one or more criteria used by customers while making a purchase and then uniquely positioning the business to meet those criteria. The differentiation offers extra value added features for which customers are willing to pay a premium over other less differentiated products. For selling monuments and tombstones which are priced more than other options available in the market, Slate needs to offer customized products which are made as per requirement of customers.

As another option, Slate could partner with a parlor to exclusively stock Slate's products. Only criteria Slate could look for is that the parlor should have a good reputation among buyers. This way buyer visiting the parlor would be provided with premium products supplied by Slate. The strategy could impress a portion of existing buyers for the parlor and could also take away a portion of such buyers who might shop from some other parlor in search of low cost products. The parlor could offer additional services free of cost which are new even to buyers. An example could be including special message for the deceased from their side based on his or her life. If such an option is not available with any other supplier, customers would be willing to pay a premium. Later, the parlor could be marketed as the "choice of every buyer" by reaching the emotional side of buyers. When buyers are emotionally convinced that Slate's products are "the best thing" they could do for the deceased, the strategy is sure to work.

The strategy would require large supporting infrastructure, probably more than what would be required by any other supplier. To be able to justify premium charges, Slate would have to satisfy customers on the worth of premium for which he would have to offer something extra. This "something extra" would demand more infrastructures in terms of handling, storage, and ...

Solution Summary

The solution discusses business and corporate strategy for Ontario Monuments Builders Association.